Problem: HBD may soon be illegal in the US.
Legislation has been proposed in the US House of Representatives that will make HBD illegal. If it becomes law, then issuing, using and allowing the use of fiat-based stablecoins will become illegal in the US without the explicit approval of the Secretary of Treasury. HBD easily fits the definition of fiat-based stablecoins as defined in the bill.
Options:
- Ignore it and pretend like nothing has changed.
- No change to Hive/HBD, prepare for legal fight. While nothing will happen immediately, we can expect that eventually there will be a crackdown, likely targetting witnesses.
- Remove HBD from Hive. Perhaps all HBD will be auto-converted to Hive.
- Request approval from Secretary of Treasury and hope we get it
- Repeg to non-fiat index.
For me, it is clear that the first 4 options are not options at all. If we cave on HBD, we will likely end up caving every time the law is changed to hurt cryptocurrencies. Fighting the legal battle directly would be very costly at this stage, especially for the witnesses on Hive, we are still too small to attempt this.
The following are 4 steps required to repeg HBD, which I think is clearly the best option available, should the law come into force.
Step 1: Define the new index.
For example it could be 10 commodities weighted equally by dollar value. It could be called something like the "Commodity Currency Unit". It should be publicised widely in the crypto space as an open standard, and other cryptocurrencies would have the option of using it as a peg as well, increasing the potential for interoperability between chains with a common unit of account.
Eg. Copper, Oil, Zinc, Aluminium, Gold, Corn, Wheat, Coffee, Sugar, Oats - 10 cents of each commodity for a total of $1 of commodities.
Step 2: Decide a repegging date.
Eg. 1st January 2022 at 00:00:00 UTC
Step 3: Determine the physical weights of the index.
On the repegging date, the weights of each commodity is determined based on current price, published on Hive, and the top witnesses vote to approve it (doesn't have to be anything more than an informal vote, eg. comments saying "I approve the new index for pricing HBD" on the post).
The index might be 1 milligram of gold + 100 grams of copper + etc. etc.
Step 4. Witnesses price Hive according to the new Index
As long as a supermajority of the top witnesses agree, their nodes switch to pricing Hive by the index instead of directly in dollars. Witness nodes determine the value of the index in dollars. They then divide the price of Hive in dollars by the price of the index, instead of reporting the price of Hive in dollars as normal. They can update their index price as often as they chose to, more often is better, but their index price never actually has to be published to the blockchain, only the final price.
Optional Step: Rebrand HBD
Rebranding would bring new attention to HBD while minimizing confusion for those who research HBD only to find old explanations of how it works. My personal suggestion would be "Commodity Dollar", it is simple while also be a self-contained explanation of what the token is.
Conclusion
Repegging is a relatively simple way we can avoid the problem of fiat-based stablecoins becoming illegal in the US in the near future.
If we have to pick any global commodity it should be gold. 😎
Hive is a decentralized global platform.
The US has no jurisdiction.
Any attempt to take action against HBD will fail.
Witnesses can be anonymous and witness servers can be any PC anywhere with an internet connection.
If the US wants to cut it self off from the crypto revolution then it seals its fate.
Hive will continue in the rest of the world.
I suggest that higher profile US based Hive witnesses relocate to a crypto friendly low tax jurisdiction or just let non-US witnesses run the show.
They aren't though. A few are pseudonymous, but most are known persons absolutely reachable by the US government. In fact, of the top 20 witnesses, a total of maybe 1 is actually anonymous, and there is a reason for this. Witnesses in Hive are trusted persons, not trusted in the sense of custodians, but they are the equivalent of mining pools in Bitcoin, also run by trusted, known individuals. It is much harder to establish a reputation of trustworthiness alongside a sense of accountability for someone who is not a known person.
Yes it will be hard for the US to shut down Hive due to decentralization, but at this stage, as small as we are, not that hard yet. It will be vastly harder for them if we manage to avoid their notice now, make an easy change to avoid this problem, continue to grow unabated, and let them only realize our relevance when Hive is something that's on everyone's smartphone and so attacking Hive is attacking the general public.
Most of the top 20 witnesses are either anonymous or non American and there are hundreds like me waiting to take their place in the top 20.
The US government only has jurisdiction over its own citizens and its own territory. They can maybe fabricate changes against one Julian Assange but not 1000s.
When the supreme court rules that the gov't has no duty to protect, can there even be citizens?
Imo, the whole 'legal' system is a sham, take away the saturnalia robes and all that is left is force.
It is not legitimate.
I contend most lawyers, in 'murica, are aware it is a sham and play along for the pay.
When I can write my rules down and force them onto you, we can discuss the legitimacy of you forcing your rules onto me.
Until then, I will resist any controls aimed at me.
I love my freedom.
What is the problem with option 3 of removing HBD?
That's likely not as simple as it sounds, destroys an enormous amount of value, and may cause an enormous amount of inflation. If it's done without compensating HBD holders, there would still be those prior risks, but the main damage would be to the integrity of the system (it would be like Bitcoin miners forking to neutralize a huge amount of bitcoin).
Aside from the inherent value of having a stablecoin, the mechanics of HBD work to remove Hive from supply, creating price pressure on Hive (removing over 8 million hive in the last few months alone). That will no longer exist if we remove HBD entirely.
Can you elaborate on this a bit for me? Is it actually removing from supply or just issuing a note that will resupply those tokens in the future if the holder seeks to redeem their HBD?
I intended to write a longer reply, which is why I haven't written one yet, but I've been away on holiday and have not had the chance.
A very simplified answer is that there is a bit of both - Hive is redeemable in the future though removed from the market but also some is destroyed entirely.
Losing potential upsides of having stablecoin within the ecosystem?
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I think Hive Based Silver Ounce would be simpler.
Yeah there is merit to that. Technically it's not that much simpler (defining and pricing an index is not a complicated thing), but conceptually it is simpler and it's an easy story to sell to users. The trade off is that silver is still a speculative commodity on its own, prone to large swings in price.
Pricing network debt in silver is a systemic risk, what if silver takes off in price?
If the USD goes down, all of those commodities will shoot up in price.
That's true but not necessarily as much in purchasing power.
The best thing we can do in terms of stability, next to a basket of currencies, is a basket of commodities. If you choose any one commodity as an index, you will almost certainly increase the stability by adding a second commodity, even if that other commodity is less stable than the first. The reason for this is that idiosyncratic volatility of each commodity is balanced against the others, eliminating idiosyncratic risk but keeping market risk (which is very challenging to eliminate).
If there is a more stable alternative to a basket of commodities, by all means we should peg to that.
The idea that anyone in the US would be prohibited not only from creating a USD-based stablecoin, but also using one is asinine. I don't know the chances of that becoming law, but it would be extremely totalitarian.
Anyway, @disregardfiat brought up that HBD price feeds could be re-targeted to other stablecoins, US-approved or not.
And should some tyrannical bill like this pass, it's a good thing Hive has a HBD/HIVE market built in to the protocol itself.
The options to keep a value stable HBD - Hive Based Denomination - are myriad. While pegging to Tether or any other coin that is non-fiat might be a ~legal stop gap I think a consumer price index would be an even better step if we can agree to such. Then it doesn't matter what inflation is, or how many dollars get printed in 2022... We still need to be careful about issuing debt and all the other economics we've talked about here. Now that we've established a relatively decent pegging it's hard to argue we should get rid of it. The DHF to savings to the general attack on stable coins in general all show that this paradigm is needed and valuable.
We don't have to get it right, we just have to get it better. The real beauty here is the governance, our ability to fork / upgrade is way ahead of it's counterparts both in and out of crypto.
CPI may make a better target for a better long term stable coin, but even if the [stablecoin] dollar becomes unstable due to inflation, basing it on something based on the US currency unit may still be better. I think the mindshare of the dollar is a bigger value than the relative stability of it. An arbitrary CPI will have zero mindshare vs. the dollar's very large mindshare.
If the dollar really shits itself, that mindshare will decline, and eventually down that road some other basis would be found. If that basis is a commonly accepted and used CPI, great. I don't see using something that is not commonly used as a value-add however. Hive should follow the market when it comes to a commonly used and understood abstract of value.
Agree there. And even if we officially change the name and method of HBD it will continue to be the Hive Backed Dollar for many. Due to the dynamic nature off all these factors I'm confident that our next step will be an improvement... and we can make them more often than others.
I don't necessarily see the name dollar as an issue. The US doesn't have any exclusive right to it.
I think they are going with the attitude that stablecoins are equivalent to counterfeit dollars. Given that the average age of a congressperson is 58, and the average age of a senator is 63, it is not surprising that they cannot understand or relate to something new like stablecoins (and the diversity of approaches within that category).
Well this could hapen for all stablecoins not only for HBD.
If this will happen than all will ignore the rule...
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Witnesses on Hive are known personalities. Hive also has major businesses in the US. They will almost certainly be the target of prosecution if we ignore the rule. HBD will also be delisted from Bittrex.
Ignoring the problem is not a good solution, although it is true that prosecutors will like pursue TetherUSD et al long before they go after Hive witnesses.
HBD has a very low volume in Bittrex, HBD is more used in the internal market and sometimes in upbit.
Maybe you're right but I would wait a little longer. Hive is still known to be a small player in this global crypto game, the one who has the most to lose will react the most. But the alliances will certainly work against this. Here is huge money in this game...
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Hive is a global p2p blockchain... maybe the next the bitcoin will become illegal too. By the way, HBD is worth $1 of hive and not a dollar. Maybe we could change the name: HBD = Hive backed Dai.
I know, but by the definition in the bill, that still qualifies as a fiat-based stablecoin. It doesn't have to be collateralized by USD, it can still qualify if it is "pegged" or "tied" to USD, regardless of how it is collateralized. HBD central premise is that it is pegged to USD.
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I mean my vote all along was to remove HBD and just reward all in HIVE that including paid to devs where it's calculated each day. Issue now is you're at the point of no return from how I see it and it needs to be set as a commodity. More wasted time and resources we need to start doing better and working on other things...
I think you underestimate how much value has been added recently by the work to stabilize HBD. There is at least 8 million less Hive in circulation thanks to stabilization in recent months.
so hive gets bought with HBD and burned?
It gets removed from supply by converting it to HBD and locking that behind the hive.fund.
@tipu curate
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I mean... Good thing HIVE doesn't fall under US jurisdiction.. lol